Adviser warning: Don't wipe millions from the value of your practice

Advisers that fail to prepare now for selling in a post-FoFA environment could be stripping millions from their sale price – even if they don’t plan to sell up for five or 10 years.

As Mike Stewart of Radar Results explained, it’s vital to get your house in order now – even if you’ve got no immediate plans to leave the financial advice profession.

“Prepare your business to sell now,” he told Wealth Professional TV.” Even if it’s five or 10 years’ time, get the right structure or right advice in place, and the right processes inside your business – because it could be the difference of up to a couple of million dollars on the valuation of your business.”

He added that it’s vital not to keep any “skeletons in the closet”, because there’s no way to pull the wool over your potential buyer’s eyes when they come to examine your practice with a fine tooth comb.

“When it gets to due diligence time, and the clients are being assessed and the books being looked at in detail, sooner or later that stuff comes out,” he said, adding that issues to be disclosed can include compliance issues, claims or staffing issues, for example.

“It’s pretty good to get that out on the table early so those things can be dealt with,” he added.

Hunts’ Group principal Anthony Hunt added that buyers won’t be afraid to walk away, or drop their offering price, if they have an inkling that everything isn’t in order.

“If you do have problems in your business, and a lot of businesses do – it’s not unusual – it’s really important to be on top of them, and to be open and upfront about them, and be there on a no surprises basis for any buyer,” he said.

“If there are structural things in your business that need to be addressed around dealing with FoFA-related issues on your income stream, or bedding down operational businesses on your practice, or sorting out some compliance issues, you need to take the time and energy to focus on those things to get them right,” he added.

Click here to view the full video and discover more vital valuation and selling tips.